It’s hard to work in finance and ignore the Occupy movements. In Chicago, the participants march past our offices on a regular basis. The whispers and rumors of some of the supposed policy proposals could have wide-sweeping consequences for the financial sector as a whole if realized. Much of the press and government have expressed confusion over what, exactly, they’re trying to do. Even in our own offices, opinion on the occupations is divided.

Ambiguous, wide reaching and controversial, what started as Occupy Wall Street has become a worldwide movement, with OccupyTogether.org reporting 118 confirmed occupations globally- many of which are U.S-based. Critics have argued that the movement is a form of class warfare comprised of hippies, anarchists and socialists, but with the numbers of supporters online and at the occupations themselves increasing daily, there comes a point where it doesn’t do us any good to pretend this isn’t happening. There comes a point where we need to understand what’s happening, and why.

The general reaction of the finance world (with notable exceptions like Soros and Bernanke) has been to dismiss the protests as a temporary annoyance, but if you read our blog, you know we rarely take anyone’s word for anything. In true Attain fashion, we decided to research the Occupy movement ourselves. After extensive reading, interviews and several trips down to the Occupy Chicago events themselves, here’s what we found.

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Reuters Breakingviews editors weigh in on what a bond offering says about the possibility of former New Jersey governor and Goldman Sachs Chief Executive Jon Corzine becoming the next U.S. Treasury Secretary. They also weigh in on other candidates.

Antony Currie, Breakingviews columnist, says that in MF Global’s Aug. 2 bond issue, there’s a key-man risk covenant that bondholders get an extra 1 percentage point payment if Corzine is tapped to work in a federal job confirmed by the Senate. (more…)

Back on July 19th, I wrote about an interview Matthew Simmons gave to King World News. Yesterday Simmons died at his home in North Haven, Maine. Published reports cited law enforcement sources who said the 67-year-old Simmons died of a heart attack in his hot tub.

Simmons was hardly a household name, mainly because his controversial views on how much oil is left to extract from the earth—a theory known as “peak oil,” his newfound determination to find renewable energy sources and his recent insistence about the criminal culpability of BP plc in the Gulf oil spill were not entirely palatable to the mainstream media. This would be the same mainstream media, mind you, that has no trouble engaging in completely serious discussion about whether Barack Obama’s mother and Hawaiian state officials were part of a far-reaching plot to cover up the true location of Obama’s birth, presumably so he could one day become president and complete America’s transition to a socialist nation.

While the circumstances behind Simmons’ death will be the topic of endless conspiracy threads on the Internet, the reality is that a contrarian voice in the conversation about our energy future has been silenced. Everyone from energy consumers to energy speculators should take note.

Hedge fund hearings in Washington

For those of you scoring at home, that’s George Soros on the far left, and to his left (your right), Renaissance’s James Simons, Paulson & Co.’s John Paulson, Harbinger’s Philip Falcone and Chicago’s own Citadel CEO Ken Griffin.

Close to half of the money flowing to hedge funds goes through funds of funds, though their share may be shrinking nearer to 40%. Smaller funds of funds face increasing pressure; a number of them closed down this year.

Others are merging or joining larger firms. The integration of George Chacko’s firm, Kite Partners, into Auda is consistent with this trend. Mr. Chacko was named Chief Investment Officer of $5 billion Auda International LP’s hedge fund investment arm. His associate Karl Neumar joined Auda Hedge as a Vice President. Kite Partners’ funds will become part of the company.

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I often encounter this quote, and I often wonder about its provenance. In fact, in the eight years now over which I have had the privilege of writing for HedgeWorld, I have repeatedly been tempted to quote it. But I never have, and I’ll now divulge the reason.

It is supposed to have been John Maynard Keynes who said, as a warning to traders looking for a quick buck on some return-to-normalcy theory: “The markets can stay irrational longer than you can stay solvent.”

The words sound like hard-earned wisdom. Indeed, if they came from Keynes, they were. It was in May 1920 that he lost disastrously on currency speculation. His brokers were rather lenient with him and at one point allowed him to meet a margin call by pledging to them the future proceeds of his then new book, The Economic Consequences of the Peace.

But did he actually say this? I google the phrase and arrive easily at 226 sites where he is quoted to this effect. I have not, I confess, thoroughly chased down each of the 226 references. But when I do go to any one of them and look for the primary source in the old-fashioned fact checker’s sense – a book with his name on the title page in which that sentence appears, or a collection of letters, or perhaps the name of a student of his who first heard it from his lips – some Boswell for this Johnsonian aphorism — I come up empty every time.

This source takes it from that source who takes it from another, and so forth.

So I put it to you, dear reader. Does anyone know the origin of this felicitously worded expression?

Aphorisms can remain mysterious longer, perhaps, than I can remain curious.

I was astonished in recent days to learn that David Einhorn and his Canadian counsel, the distinguished R. Paul Steep, have been tripped up by what may be the most basic, and the best-known, principle of evidence in the common-law world: the exclusion of hearsay.

But there it was in black and white: Justice Katherine Swinton in a lecturing mode. Ontario’s corporate law is somewhat different from that of the state of Delaware, so phrases such as “oppression application” may sound odd on the sunnier side of Niagara Falls. Nonetheless, the rules of evidence are very much the same in Canada as in the United States, and for that matter in the mother country we share.

Hearsay is “an out of court statement offered for the truth of the matter asserted.” As such it isn’t admissible unless there is a good reason why it should be, and there are certain narrowly-defined good reasons, or exceptions, to the general rule of exclusion.

Greenlight sought to establish that as reasonable stockholders they would have expected that the role of one of their portfolio companies in one of its portfolio companies was to be relatively passive. Why was this expectation reasonable? Apparently because two representatives of the issuer, MID, had told a Greenlight figure, Venit Sethi, exactly that.

What if Sethi had prepared an affidavit saying, “They told me they weren’t going to bet on the horses”? Would that affidavit itself have constituted hearsay? No. It would have been the repetition of an out-of-court statement, but that statement would not have been offered for the truth of the matter asserted. It would have been offered in order to show something about the reasonableness of Mr. Sethi’s subsequent expectations, i.e. that he reasonably believed they thereafter weren’t going to bet on horses. That sort of thing is not hearsay, and when reasonableness is an issue in dispute, it is admissible.

The crucial point though is that Mr. Sethi didn’t sign any affidavit. According to the two judicial opinions now available: Mr. Einhorn signed an affidavit. This document said, in effect, “Mr. Sethi told me that they told him that they weren’t going to bet on the horses.” This was in fact offered for the truth of the matter asserted. Messrs Einhorn and Steep presumably wanted the court to infer that MID honchos had in fact told Mr. Sethi this. By definition, then, it was hearsay.

Mr. Steep, by the way, isn’t some straight-out-of-law-school greenhorn. He’s been a member of the Ontario bar for a quarter of a century. He recently spent four years as the chair of his law firm’s litigation group. I’m certain he knows the hearsay rule, which is precisely why I repeatedly sought to speak to him while working on a story on the case. Unfortunately, that conversation didn’t happen.

I have to suspect, in lieu of any other more plausible inference, that Mr. Steep was engaged in client management when he submitted Mr. Einhorn’s affidavit. He may have known he had a losing case on his hands, but wanting to seem to be earning his fee, he went through the motions anyway – and this hopelessly hearsay affidavit was a result.

I’m a big admirer of activist investors – both as a hedge fund strategy and, for that matter, more generally. Activism, even when it comes to the point of litigation, is an affirmation of the plain and vital truth that it is the shareholders who own the company, and that the managers work for them: all of them, of however large or small a stake.

Still, litigants in such a cause must expect to abide by the rules, especially rules that go back centuries. I wish the position into which Messrs Einhorn and Steep have worked themselves didn’t seem as untenable as it does. But it does.

In the past week I’ve heard bad news from several friends in the financial industry. Their jobs are gone or going. These are topnotch professionals—highly skilled, capable and conscientious. They are, of course, part of a big crowd. Thousands are being let go by financial firms in New York and London.

Many of these people came from Asia in the brain drain to advanced economies. Large numbers of them may now go back home—and start hedge funds there. “Money is moving away from developed countries,” says Raju Panjwani. “Big funds of funds and pensions are looking ahead and they’re interested in Asia. So people will move back.”

Mr. Panjwani founded Epitome Global Services, a fund administrator based in Mumbai, India, in 2005. Before that, he was a managing director at Morgan Stanley in New York and established Morgan Stanley’s asset management, investment banking and other businesses in India.

 In short, he has ample experience in both worlds. “Talent will find the right place,” he says. “There’s a shift of both capital and people around the world.” 

 The nascent Indian hedge fund industry stands to be a major beneficiary of the reverse brain drain. Some of the mobile talent looks to raise funds in that country. Institutional money seeks Asian hedge funds. Mr. Panjwani’s prediction will come full circle when the twain meet.  

Last week, HedgeWorld received an anonymous tip about some executive shakeups at Highland Capital Management LP, which could suggest that hard times have befallen the asset manager. A few of the tips were right, though the firm supposedly plans to continue adding new staff in the coming months.

But our nameless detective also said Harold Siegel, a lead marketing staff member, resigned from Highland Capital. If this person had only picked up the phone or written an email or two, he or she would have learned that as of about 6:15 p.m. EST on July 2, Mr. Siegel still works in Highland Capital’s New York office. I know this because I spoke with him, and this was the first rumor he’d heard that he “left the firm.” Though he confirmed that he was himself and that he had not resigned, maybe I’ll have to look into a potential conspiracy.

But in the meantime, while it’s nice to get a heads up on industry goings on from our readers, reporters—amateur or professional—should always check their facts.

The Bayou case, especially given Samuel Israel’s status as a famous RV-dwelling fugitive, is on everybody’s mind these days.

Such matters are surely on the mind of Phillip Bennett’s attorneys. They’ve filed a reply to the government’s sentencing memorandum in his case that tries to draw a compelling Bennett-ain’t-Israel distinction.

Our HedgeWorld readers may remember the arguments of the government’s memo. To review: it suggested that the court should give Mr. Bennett, who once stood atop the Refco colossus, twenty or more years in prison because he “spent nearly a decade of his professional life … committing crime after crime, balancing and coordinating multiple acts of fraud on literally a daily basis,” on a scale that dwarfed … well, the Bayou matter, as well as many others of great notoriety.
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